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Attorney General Investigates Music Price Fixing
An anonymous reader writes "The Guardian is reporting that the US Attorney General has launched an investigation into whether or not record labels are engaged in price fixing of music downloads. From the article: 'The department of justice inquiry centers on the activities of the four largest record labels: EMI, Sony BMG, Universal and Warner Music. Subpoenas are believed to have been issued to all parties, with federal officials understood to be focusing on whether the companies have been colluding to keep the price of downloads artificially high.'"
Another pretty good article on this subject can be found at this site
Everyone is greedy to a point. Some are just able to carry their greed to the point of complete selfishness and totally ignore the high percentage of people who have a hard time just keeping a roof over their heads.
What the heck will it take? Evolution of the human species? I always think back to those old Star Trek episodes where they land on some planet where the inhabitants laugh kindly at Earth's culture because they have learned to live without greed, take care of everyone, and actually enjoy sex rather than codify it.
I don't know why I want to write this... mod at your leisure. But before you bite my head off, I want to make sure all the future commenters out there read this very key quote: Hopefully that will keep those crazy anti-Apple fanboys at bay.
...they have to pay a $50 fine and publish a press release including the words "We are vewwy, vewwy sowwy." Rinse, repeat 10 years later...
I've been curious why it costs more to buy an entire album via download, than it does to buy the cd... IIRC it cost the lables more to make a tape, than to produce a cd, and the prices for cd were greater than tapes. Now without having to produce a pyhsical tangible disc or tape, the costs are higher still, witrhout packaging and liner notes, and printing costs. smells like price gouging to me.
http://politics.slashdot.org/article.pl?sid=06/03/ 03/1543256
But we're talking about music and music here. Your parable and the attorney general's actions are like apples and oranges.
They are 10 years late and investigating the wrong medium. I don't see anything wrong with 99 cents per song, my issues were the $21 for a CD with one decent song.
labels -are- useful in some/many aspects. They do hunt for talent, provide resources for recording, orchestrate tours and publicity, and provide financial backing of upstart groups.
A group of talented individuals can certainly gather their own resources and make their own connections and get their own loans, but the odds of a bank financing a fledgeling music group or being able to get a booking at a big venue or get you airtime on a hundred stations by making one phonecall are pretty slim. Admittedly, the labels have connections and can get things done more easily and if the label is willing to back the singer, then the people that deal with the studio and band will trust their judgement.
An artist can certainly get their music recorded in a garage or even a studio if theyve got a few bucks, and release it on the net- but try getting your song available on iTunes. There are songs from real, popular bands that aren't on iTunes, why should I be able to find a song by Joe Schmoe's Band? Getting a booking for a little band is tough too. You pretty much have to have someone whose heard your music recommend/suggest you, which makes a chicken and egg deal for a new group. Labels get your foot in the door because they trust you.
I always think of how it can cost 99 cents to download a full song from iTunes, which is a reasonable price considering a music CD costs at most that much on average, but then a ringtone of the same song, a 15 second or so clip, costs 3 dollars to download from the service provider of the phone. I should at least get the whole song on my phone for that much moola.
The music industry is solely responsible for the awesome quality of music that is available to everyone, and without them, this music would never see the light of day. I don't even want to think about how we would all survive without these conglomerates!
How about a new parable that actually fits?
Once upon a time there were a couple record companies. Through the years, their product was the creation, publishing, and distribution of music on various analog media. As technology progressed, they were able to condense even more songs into a smaller product, at an even lower cost to themselves.
One day, a new technology came along that allowed customers to take songs and give them amongst each other, for free. This new technology allowed instantaneous and essentially free distribution. At first the companies attempted to stop customers by making their activities and technologies illegal. Slowly, however, they began to consider adopting this new method of distribution themselves.
But instead of reducing their prices to reflect the change in cost to deliver the product to market, these companies decided to increase their costs, in the name of profitability and growth and investors. When customers saw that the companies were overcharging them, they began to deliberately turn away, continuing to take the product, but without paying for it. In turn, the companies decided to increase their prices further, to make a greater profit off of the shrinking market. But the more they increased the cost, the fewer customers they seemed to have...
Price fixing has been a hallmark of the music industry for fifty years. Let's look at CD's.
It costs any record company, on average, about $0.25 to get one CD into a retail store. This includes:
Normally, manufacturers strive to keep their cost per unit at or below 12.5% of the retail price. The distributor then buys the unit at 30% to 40% of retail. The retailer buys the unit at 60% of retail. The customer buys the unit at (you guessed it) full retail price.
Let's see how the typical $16 CD retail price breaks down:
But Wait!!! Most record companies are their own distributors. More profit for them.
We see now that $0.25 (real cost) is about 1/8 of the production cost calculated here. Following the model, one CD should cost about $2.00.
Which is still more than most of the trite crap produced these days is worth. Music isn't a cash cow, it's a cash herd.
Now if you want to write a real analogy
*The 2 farmers would be members of the FPAA (fruit producers association of america)
*They would be actively working together through the FPAA to sue their users who make illegal copies through planting seeds
*They would be suing people for planting with no real proof they actually planted
*They would have a long history of losing antitrust cases dating back to the 60s
*The FPAA would actively be working to strongarm stores to sell their fruit at higher prices.
*The FPAA would have a long history of screwing over their fruit producers (artists)
In this case is antitrust worth looking into? Hell fucking yes.
I still have more fans than freaks. WTF is wrong with you people?
Don't they realise that 90% of albums make a loss?! That marketing and distribution is incredibly expensive? That the few artists who do make a profit essentially provide a subsidy so the record companies can go out and find new talent?
Do these busybodies not grasp that record company executives need to have two new luxury cars every year?
Do they not realise that by the time you've bribed DJs all around the world to play your music rather than the interesting demo some promising new band sent them, there's only enough money left for bonuses in the region of $20 million/year? How can record companies hope to continue attracting the best chief executives if they can only pay $20million in bonuses?
"I always think of how it can cost 99 cents to download a full song from iTunes... but then a ringtone... costs 3 dollars"
That's because p2p networks still keeps prices on downloads down.
Pricing on copyrighted material isnt set relative to costs, it's set relative to available capital for purchases. If the consumers get more money, then the prices will rise, regardless of actual costs. The only 'competition' there is is illicit copying.
The DOJ suing the labels for 'collusion to keep prices up' is rather ironic and just shows how far from reality the concept of IP has gone.
To the attorney general: Yes, of course there is price fixing and collusion to keep the price up. It's in the damn code of law. Look under the heading 'digital millenium copyright act' in your own bookshelf and you'll find all the evidence you need. 'Keeping the prices up' was the whole point of it.
I don't care about price fixing of music downloads. Look at price fixing of physical CDs instead. How can a music CD cost the same as a movie DVD? And while they're at it, make them use the true CDROM standard, without drm hacks.
Thats because when you buy a ringtone, you in fact license it for playing it in public. When you buy a song, you license it for playing it in limited groups.
1) Cold hard cash will be transfered under "campaign contribution" from the mysterious Big Four to the US Attorney General.
2) Investigation will reveal nothing.
3) Profit!
How about a new parable that actually fits?
What did you expect from BadAnalogyGuy?
Even if the attorney general did decide to take some action, it would undoubtedly be some slap-on-the-wrist fine or equally ineffective measure. Nobody seems to ever consider doing something that might be effective. In this case, the problem is at its root caused by the government-granted monopoly of copyright. No copyright, no problems! If the government is unhappy with the copyright monopolies they have created, why not strike the problem at its root and weaken the copyrights of those who abuse them?
This would work not just on music companies but on any business built on copyright; for example software businesses such as Microsoft. Instead of a fine, simply slash the duration of copyright on the company's assets, or even release some portion of them to the public domain immediately. This would not only serve as a deterrent to future abuses; it would actually reduce their *ability* to commit abuses in the present, and it would measurably benefit the public as well.
main(c,r){for(r=32;r;) printf(++c>31?c=!r--,"\n":c<r?" ":~c&r?" `":" #");}
"So even for the "cheap" model of production, you're looking at $10 CDs."
Impossible.
Sony BMG has once-a-month sales where they ship CD's to your house at $6-7 per disk. Presumably when I buy a $6 CD, Sony is not losing money, so it suggests the cost is significantly lower than you calculate.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
How about a new parable that actually fits?
Rewind a bit...
"Pop" music depends on hype. I, for one, do not think that the screaming teenage girls in the 50's phenomenon was entirely "spontaneous". That was staged and aggressively promoted. Thus, pop music hysteria was born, and what better pent-up group of emotions than pre-adolescent, innocent females would there be to manipulate?
A few reasons.
I'm not 'flaming', or trying to be a prick in any way. It just seems that most Digg users don't understand why we aren't deserting Slashdot in droves for their site. You asked, I answered.
Let's cut to the chase, shall we?
The "product" costs $2.50 to get out of the factory to the distributor. That sounds reasonable, I'll buy those prices.
I don't buy two more doublings from there to the stores. If there's 300% profit between the distributor and the public, then someone's going to come in and buy from the distributor and ship directly to their stores, and sell them for $5.00.
If you can't do that, because none of the distributors will sell direct to retail, then guess what... that's price fixing.
Great! Now I squirted milk out of my nose! It is entirely thanks to MS that we have such inexpensive hardware
That made me choke on my sandwich! There used to be this comapny named Compaq which reverse engineered the IBM BIOS and created a clone market. MS merely rode on this boom.
Microsft marketing wins again!
I can throw myself at the ground, and miss.
I recently discovered for myself the used CD market on ebay.
I have currently purchased about ~50 cds. I got most for about $3 - $4 each on average including shipping. Each CD is a full album (no singles). Most have 10-15 songs on them. Many come from shops specializing in the sale of used cds...
Which means I'm paying about $0.30 per song. And to think that someone had to collect these CDs, figure out which ones were scratched, which not, advertise on ebay, put them into a box, and ship them to be via the postal mail...
Even if 25% of the CD is so scratched up that my computer can't read it, I still come out -- way ahead. And I like to think that maybe I'm helping someone [non-RIAA] out... (which may/may not be the case)
And to think that we currently have an *industry* selling electronic copies of songs for $0.99? Thery already had the digitized recording from the recording studios... Bandwidth these days is practically free. There is virtually no packaging or transportation cost. Very little human intervention is required....
So are the music companies colluding? Maybe. Or maybe they are just exploiting the dumbness of their customers... These companies are large enough to **define** the market. They don't have to answer to supply & demand. The real crime is that the public puts up with this and asks for more...
Does anyone remember how buying home VHS/DVD movies used to be expensive? $15-$20 US for a single movie? Lately, Wal-Mart has a huge crate in their electronics dept, filled with DVDs for ~$5-$7 each... (*renting* at blockbuster costs almost that much ~$4). When displayed like that, I realize how stilly this whole $$$ for IP thing really is... But when displayed neatly in nice packaging on a shelf, these videos somehow appear [to the public] to merit their price...
Some might say the $5-$7 movies are crap... Well, what are most of downloadable songs selling for $0.99 EACH??? And movies cost far far more to produce than music...
Come to think of it, the DOJ antitrust investigations really aren't what they used to be at all. When they smacked down IBM, they put the fear of God into the company! For decades after that IBM bent over backwards to obey the terms of their agreement with the department. Ever since then though, it seems like all the companies that get investigated and found guilty of anti-competitive behavior just shrug it off and keep doing what they were doing before.
I don't know when exactly the DOJ lost the ability to scare the living hell out of a company like they did with IBM, but I think they need to get that ability back. Otherwise they're just wasting my tax dollars. I think the best way to do that is to make a particularly brutal example of the next company they investigate. What? You say it's the music industry? Well... OK then! Get to it, guys!
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
You are confusing price setting with price fixing. Most forms of price setting are legal - ultimately a manufacturer decides how much they want to charge for their product. Manufacturers cannot, however, legally dictate the final retail price (well, this is true in Australia). Of course, they can always could scuttle $0.99 downloads by refusing to sell tracks to apple under $0.99.
Price fixing is when different companies in the same industry collude to artificially set the prices of goods at a price far higher than what normal market forces would dictate. It is usually difficult to prove as you need evidence of the collusion part. In production of goods, when a competitor raises prices, you can either maintain prices, hoping to steal market share or you can cash in by raising your prices too! In the music industry, the end products are not exact matches for each other - artists are generally not marketed under different labels so you would be incredibly stupid to try to steal market share!
In many respects, selling music is the perfect encapsulation of Capitalism - "screw the customer for whatever you can!" - and as long as we keep paying what they ask, the labels will continue to do so.